4 Keys to a Great Business Plan

Meet the Expert

At some point in your life as an entrepreneur, you’ll need a business plan. In fact, any time you need to raise outside funding, you’ll need to develop a plan for investors or lenders. If that plan isn’t great, your ability to raise funding will be hampered. To ensure that doesn’t happen to you, here are four keys to a great business plan.

1. Start with a Clear Explanation of Your Business

Most lenders and investors receive tons of business plans. Because there are only so many hours in a day, you need to ensure they spend more time with your plan than with the others. Luckily for you, most business plans lose the reader in the first few sentences. How? By poorly explaining what the venture does. Remember, the reader doesn’t have time to decipher what it is you do; they have too many other plans to read. So, make sure you start the plan with a very concise definition of your business. Then you can go into more detail regarding what makes your business and your team unique.

2. Discuss the Unique Qualification of Your Business

Nobody wants to fund a business that’s not unique. If your business has no unique qualifications, you’ll surely fail.

Sometimes your unique qualifications may include simple things like having secured the best location. Other unique qualifications might include your customer base, intellectual property, and team members who have exceptional talent and experience. Be sure to explicitly state these qualifications, since they are critical to funding decisions.

3. Present a Financial Model that Makes Sense

Lenders want to know you’ll be able to pay them back. And investors want to know you have the potential to give them a healthy ROI.

So, in making funding decisions, they will scrutinize your financial model to ensure that it is realistic. For example, if you’re a startup, the chance of your reaching $100 million in sales in three years is minimal. Unrealistic projections like this will kill your credibility and your chances of raising funding.

Rather, build a financial model based on realistic assumptions. Research other companies in your industry to understand figures such as traditional operating margins, receivable cycles and salaries. Doing so will enable you to create a financial model that better represents how your company might actually perform so investors and lenders can see that it fits their criteria.

4. Show That You Really Know Your Market

Great companies really know their markets. They know market trends. They understand the precise needs of their customers. And they know the competition’s strengths and weaknesses.

Without this in-depth knowledge, it’s hard to build a great company. And without this knowledge, it’s hard to convince investors and lenders to fund you. So make sure you have thoroughly researched your market, customers and competitors, and concisely present this information to them.

Dave Lavinsky is the president of Growthink, a consulting firm that has developed business plans for thousands of entrepreneurs since 1999. You can learn more at http://www.growthink.com/businessplan.